The Ledger – November 2017 Expense Report

Despite some unusual expenses, we stayed well below our monthly budget in November. What are some of these expenses, you say?

Trip to Mesa Verde

Veteran’s day weekend, November 11-12, were free national park days. We decided to take a jaunt down to Cortez, CO to visit Mesa Verde National Park. I hadn’t been there since I was a child and I wanted to take Little Miss TJL since we have previously visited Bandelier and Mogollon cave dwellings in New Mexico.

We have an anthropology professor friend who lives near Mesa Verde, so we were able to simultaneously spend time with a close friend and get the inside scoop on the park.

We finished fixing the leaky roof in our camper ($311). It is a long day drive to Cortez so we stopped midway at Pagosa Springs Hot Springs resort. We soaked ($66) for a few hours before we drove the rest of the way to our friend’s house.

This guy watched the house for us.

Lucky for us, an elk had been harvested that day! The rest of the weekend was spent dining on freshly processed elk steak and visiting with new and old friends. Plus Little Miss got to learn all about cutting up an animal. She seemed far more interested in eating meat after that experience. Plus she got to show of her knife. I bet the hunters were impressed.

We did make it to the park, but it wasn’t really the highlight of the trip for me, just a cool way to spend the day. The real awesomeness was the beautiful scenic drive, and hanging out with people who get me.

Between groceries and restaurants we spent $134 on food. Usually I would categorize these as vacation expenses, but our spending was so low in November, I just absorb it into the normal monthly spending.

 

The Last Waltz

A local community production full of exceptional talent and love

The other unusual expense was for concert tickets ($40). The last time I went to a concert was Lollapalooza in 1995. That’s probably not entirely true, but there haven’t been many since.

Every year on Thanksgiving, we spend the morning with friends at their house and they always play The Last Waltz, a documentary by Martin Scorsese about the last concert, held on Thanksgiving day in 1976, by The Band and guest musicians like Bob Dylan, Van Morrison, Joni Mitchell, Eric Clapton and more. This year, being musicians and artists, they decided to perform The Last Waltz.

They organized 20+ local musicians, sold tickets, solicited corporate and title sponsors and produced this amazing collaborative show in about 2 months. They sold out in two days!

The venue was packed and filled with excitement! Within 15 seconds into the concert, over half of the audience was up and dancing. The energy level stayed elevated for the entire 2.5 hours. The electric buzz and joy was palpable. Best $40 I have spent in a long time.

 

The Expense Report!

In the tables, I produce a monthly and year-to-date summary of expenses, the monthly spending average, and the budget. I keep track of progress and spending behavior. It is much easier to detect any problem areas by keeping careful track of where the money is going.

Summary of November 2017 spending

Green highlighted fields indicate income. We have four sources of regular income; salary and related benefits, rental income, interest and dividends and Mr. TJL’s business income.

Orange highlighted fields indicate expense and are denoted as a negative value in parentheses. Our regular expenses are categorized by monthly expenses and yearly expenses. The combination are our total operating expenses. Additional expenses are paycheck deductions of charitable contributions, health insurance and income taxes.

Blue highlighted fields are our investment and savings contribution.

The bottom line is the balance.

Our monthly budget is tabulated in the far right column.

 

Our overall income increased in November due to across the board salary adjustments. Did we increase our household spending when we received a raise? Hell no! Any extra money goes immediately to savings.

The art business lost money this month due to commissioned projects still in progress. We expect a little more business income next month. To date, we have over spent by $1,733. This amount is about what we expect to receive from our tax return, so it all works out in the end, right?

In November, we realized a savings rate of 74%!

 

The Jolly Ledger’s Income Statement

I prefer to manage our finances like a business so I track all sources of income and expense. Below are the details for the monthly summary.

 

2017 FIRE Progress

I am on-track to retire in four years at age 45. To visualize my progress, I chart my expenses versus my passive income. Passive income is calculated as 4%, the safe withdrawal rate, of my investment balance including holdings in 401k, traditional IRA, Roth IRA, and brokerage accounts.

Due to the contributions and earnings on our investments, our passive income is $1,677 (as of 11/1/2017) per month. In retirement, we expect to withdraw $2,733* per month.

Expenses tabulated in the chart combine the household expenses with the business expenses, so it does not reveal our true cost of living, which has stabilized to near $3000 per month. I am hoping that this level of spending becomes our “norm”.

*Total retirement spending is expected to be $40,000 per year. We will receive $7,200 per year in rental income. Our investments will have to provide us with the remaining $32,800, hence $2,733 per month. If Mr. TJL’s art business provides any income, we will be able to withdraw less, but we are conservatively planning as if we will not make any income in retirement.

 

Can you believe it is December already?

Posted in The Ledger | Tagged , | Leave a comment

Financial Planning for 2018

Three years ago, we started an action plan to retire in early 2021. Today we are nearly 60% to our goal. Over the next two years we aim to save an additional $175,000, invested in low-cost index funds (we use Vanguard). The final year of work (2020) we will continue to max out our tax-deferred accounts, will build a cash buffer and pay off the mortgage on our rental property. The cash flow from this property will supplement our early retirement.

There are only a few steps to achieve financial independence quickly:

  1. Decrease spending to less than 50% of your net income
  2. Invest the remainder in low cost index funds
  3. Project retirement spending and when your investment income reaches 25-33x the expected expenses, retire.

As part of our pre-FIRE preparation, we are attempting to find the base level for our annual spending. Ideally, this amount should be $36,000. To date we have not reached this goal. With a little financial planning, we should get close. Here is our financial plan for 2018.

 

Spend $36,000 or less

In 2017, we spent a (projected) total of ~ $40,000. The overage was due to a large unexpected expense  in January when we chose to cut down a large spruce tree for safety reasons. This cost us over $3,000. Because we are diligent savers and do not live paycheck to paycheck, this expense was easily covered but caused us to bust our 2017 budget of $38,000.

Despite being over-budget by $2,000, we attained a net savings income rate of nearly 70%!

In 2018, a budget of $36,000 should be attainable although we might go over again if we tackle a few house projects. As long as we meet our savings goals, I am content to spend on maintenance items while I still have an employer-sponsored income.

 

Monthly Budget

We stuck pretty close to budget in 2017, going over by just $85 per month. For 2018, I have adjusted a few line items slightly to reflect actual spending patterns.

In February, I switched phone carriers from AT&T to Consumer Cellular. The service remains unchanged but my bill was reduced by $30 per month. The 2017 estimate for phone service was too low. The 2018 budget reflects reality with this new carrier.

I have allotted more for household spending and less for groceries to reflect what we have been spending in these line items but the total remains the same. Honestly, this is where we overspend our monthly budget the most. I don’t mind going over budget if there is a good reason like personal enrichment or fun. Nevertheless, I strive for a lower spend to challenge myself to spend more wisely.

My “insane drive to work” gas costs have decreased with the addition of another commuter. An increase in gas prices could affect this line item.

I negotiated a lower internet price this year. It is good through October 2018 when I will renegotiate with our internet provider.

 

Yearly Budget

In 2017, we exceeded our yearly budget by nearly $3,500. Nearly all of this was an unexpected tree expense, although we also spent a little more than expected for medical expenses. Otherwise, we stuck close to the budget. No major fails here.

For 2018, I have decreased the car expenses since I dropped the coverage on our vehicles to liability only. In addition, registration costs continue to decrease each year as the cars age.

Health insurance costs increased by $9 per month this year. Starting in January, we will pay $91 per month for a high-deductible consumer health plan for family of three. I contribute the maximum* to a health savings account (HSA) as part of this plan but do not withdraw from this account to pay medical expenses. Instead, I budget $500 for out-of-pocket medical expenses.

*The IRS has increased the contribution limit to $6,900 for 2018.

I eliminated charitable giving. I feel a little bad about this, but there are some major projects I would like to get done and some of the money will come from here.

Our family has stopped skiing as much as we used to, so instead of purchasing season passes, we budgeted $240 for winter activities. This gives us some flexibility in case we would rather rent snowshoes or go cross-country skiing than downhill ski at a resort.

I increased the vacation budget back to our normal vacation spending, BECAUSE I NEED THIS.

 

Overall in 2017, we overspent by about $400 per month. In 2018, total expenses should be closer to $3,000 per month.

 

Optional maintenance budget

Income through Mr. TJL’s business, part-time work and garage sales is considered extra. If we earn extra income this year, we will re-wire the electric service to the garage. It is estimated to cost $3,000. This would qualify as a business expense and is a tax deduction.

We also need to paint the architectural shingles on our house. We plan to do this project ourselves in order to become DIY badasses and to keep the costs between $500-$1,000.

 

Contribute maximum to tax-advantaged accounts

A high-savings rate is key to our success in being able to retire at 45! In combination with keeping expenses as low as possible, we take advantage of tax-efficient investment accounts now while our income is high! In addition, we take advantage of my employer’s generous match and contribution to the 401(k) and HSA accounts.

For 2018, the IRS has raised contribution limits to the 401 (k) to $18,500 and the HSA to $6,900.

401 (k) = $18,500

Employer match (10% of base salary) = $11,620

Traditional IRA = $5,500

HSA = $5,550

Employer contribution to HSA = $1,350

2018 Total pre-tax savings = $42,520

 

Contribute to taxable accounts

Vanguard Brokerage account = $43,675

All leftover money is invested in VTSAX. The fees are very low and the performance generally mimics the S&P 500 index.

The amount contributed to this account is highly dependent on my yearly bonus, tax return and merit raise. It could vary by up to +/- $5,000.

2018 Total after-tax savings = $43,675

 

2018 Total savings = $86,195

That’s the plan. Spend $36,000 and save $86,000. Now for the execution.

 

Do you have a financial plan for 2018?

 

 

Posted in Rocky Mountain FI | Tagged , , | 2 Comments

Church of FI –Unexpected and October expense reports

Two years ago when metal prices tanked, my company cut all raises to 0%, and last year we received a meager 2% raise. As a result, incomes have fallen behind market value. I knew this but I am too lazy to find another job.

Because of this unintended apathy  loyalty, recently my corporation gave a 5% salary increase to all employees who have worked continuously for two years. All other employees receive a generous but lower increase.

Their message is that they value their employees and will share the wealth when times are good. Of course, this is really an attempt to be more competitive in the job market and hire talent, but I’ll take that 5% and gladly!

Even more encouraging, this raise is not in lieu of our regular merit increases in March. Unless something goes terribly wrong in the next six months (knock on wood), we should expect those too.

Continue reading

Posted in Church of FI | Tagged , , | 5 Comments

The Big Scratch – November 2017 Net Worth Report

Holy shit! We just surpassed $800,000 in net worth! We are well past our year end projections of $784,000.

I wish I knew what hashtags were; this might be hashtag worthy.

As you can see, our investments have seen steady growth in 2017, primarily due to a strong market and a high savings rate. We will continue to invest over the next two months but I would also like to build my cash reserve a little.

Continue reading

Posted in The Big Scratch | Tagged , , , , | 2 Comments

The Ledger –October 2017 expense reports

In October, Mr. TJL broke a tooth and needed a crown; a major dental expense. How expensive, you ask? $1290! Luckily, our insurance covers 50%, but we are on the hook for $645.

As a result, we have exceeded our annual budget for out-of-pocket medical expenses, which I had originally set at $500.

The good news is that we will be reimbursed for $265 worth of blood work I had done earlier this year.

In short, I made many phone calls to my insurance company trying to persuade them that the blood work was preventative and should be covered 100%. Ultimately, they disagreed and I paid the bill. Oddly, this month they spontaneously decided to cover the expense. I literally, have no idea why except that maybe I was right in the first place. Why is this shit so hard to figure out and why the six-month lag time?

Continue reading

Posted in The Ledger | Tagged , | Leave a comment

In Search of Purpose

I expected Jeffrey Tambor’s memoir, “Are you anybody?” to be a funny read but instead it proved to be reflective and thought provoking.

He recalls teaching an acting class in which one talented student, a girl, was just killing it but would falter with the more intimate scenes. After class, he asked the question, “What’s holding you back? The answer was simply her story. As she was pursuing her Hollywood dreams, her father would call every night and ask, “Are you still my good girl”? This made acting out sexually explicit scenes, well, awkward.

Continue reading

Posted in Rocky Mountain FI | Tagged | 3 Comments

Church of FI – Self-made millionaire and September expense reports

The average time it takes to become a self-made millionaire is 32 years . By the time I retire in 2021 with a net worth of over 1 million dollars, I will have put in 16 years at my current job, half the time.

Continue reading

Posted in Church of FI | Tagged , | 5 Comments

The Big Scratch – October 2017 Net Worth Report

Since the beginning of the year, our investments have earned over $50,000 (earned not contributed)! That is a whole separate salary!

The earnings are due to a strong market but, I insist on taking the time to revel in it.

Pop open the champagne and celebrate for a second! Yell from the rooftops! Part-tay! Not all years are like this.

We also surpassed our year-end net worth projections of $784,000. We now sit at a healthy $788,200 with three months of contributions to go! If the market holds, we could reach $800,000 by year’s end.

Continue reading

Posted in The Big Scratch | Tagged , , , | Leave a comment

The Ledger –September 2017 expense reports

September was a birthday month for Mr. TJL. He is a grand 43! To celebrate we went bowling with some close friends.

His driver’s license expired; he renewed online. We thought this would be relatively easy and way better than our local DMV (which has the typical horrendous woman and is never open except at the most inconvenient times). However, three weeks later, he still doesn’t have a new license.

Anyone else renewed their license online? How long should it take? I guess we will making a phone call soon.

Continue reading

Posted in The Ledger | Tagged | Leave a comment

Planning for “enough” for FIRE

Who doesn’t like a good waffle?

I tend to waffle back and forth on how much we actually require for FIRE. Save too much and I risk working too long. Save too little and I end up scrambling for work late in life for a lower-wage job.

By knowing our retirement income sources and expenses, I see what we need for our “enough”.

Continue reading

Posted in Rocky Mountain FI | Tagged , , | 3 Comments